– Dollar now N205, pounds N300, euros N220
THE naira is slowly regaining its colour, appreciating day after day, following the new rule by banks to stop accepting deposits into domiciliary accounts.
And on Monday, August 3, 2015, the naira gained many points against several international currencies in the black market.
The dollar hovered around N205, euro was N210 and the pound sterling around N300. In fact, many foreign exchange traders were confused about the rates to sell or buy. Some of them were lamenting that in just three days they lost so much, as much as N30 on the dollar, pound or euro.
The confusion was so apparent that some dealers were stuttering when we asked them for prices of the international currencies.
The run on the naira in the last few months which saw it romancing N245 to the dollar, N270 to the Euro and over N360 to the pound sterling, was largely due to speculation, money laundering of stolen government funds and proceeds of crime, among others.
And to stem the collapse of the naira, the banks decided to support the Central Bank of Nigeria’s policy of shoring up our currency. They decided to stop accepting deposits into domiciliary accounts – and the measure has improved the rating of the naira against major international currencies in just days.
Among other banks, GTBank notified its customers on Saturday, August 1, 2015, that they would no longer accept foreign currency cash deposits. The statement read:
Temporary Suspension of Foreign Currency Cash Deposits
Please, be informed that due to the unavailability of outlets for managing foreign currency cash deposits, we have found it necessary to temporarily suspend receipts of foreign currency cash deposits into domiciliary accounts at all our branches nationwide from Monday, August 3, 2015.
In addition, foreign currency cash deposits into domiciliary accounts made prior to this notice will not be eligible for outward electronic transfer and can only be withdrawn as cash.
Please note that this temporary measure does not affect electronic transfer of funds into or from your domiciliary accounts and, you will continue to have access to foreign currency cash withdrawals from your account.
Whilst we have had to take this step to temporarily suspend foreign currency cash deposits, we would like to assure you that we are working hard at finding alternative outlets and a quick solution to this situation.
Kindly accept our sincere apologies for any inconvenience this might cause.
Thank you for banking with us.
The CBN, also on Saturday, August 1, issued a press release titled, ‘Renewed Vigilance To Prohibit Illicit Financial Flows in Nigeria’s Banking System,’ signed by Ibrahim Muazu, Director, Corporation Communication:
“The Central Bank of Nigeria (CBN) notes with concern a recent report by the Global Financial Integrity group, which ranks Nigeria as one of the 10 largest countries for illicit financial flows in the world.
“Although we do not have an independent confirmation of this assertion, the report estimates that about US$15.7 billion of illicit funds go through our system annually.
“CBN will increase its vigilance to ensure that Nigerian banks are not used as conduits for illicit fund flows, especially in foreign currencies.
“We note and applaud that in line with global best practice, Nigerian banks have started to curtail the acceptance of foreign currency cash deposits, much the same way as customers in other countries cannot just walk into banks and make foreign currency cash deposits without proper documentation.
“We wish to assure all citizens seeking foreign currencies for legitimate personal and/or business interests that there remains ample opportunity to do so within the law. The CBN’s Foreign Exchange Rules have many windows for accessing foreign exchange for legitimate business as well as for personal commitments.”
The CBN governor, Godwin Emefiele, in an interview with This Day on Monday, August 3, confirmed the positive results the measure have started garnering.
Here are excerpts from the interview:
Approximately, how much of this foreign currency do we have in the banking system?
I don’t have the exact amount, but I believe it is over $1 billion cash.
By rejecting foreign cash deposits, is the CBN not tampering with people’s ability to operate domiciliary accounts?
No, there is no attempt to tamper with people’s ability to operate domiciliary accounts. But what we are saying is that we would support the banks when they say they would not accept dollar deposits in domiciliary accounts.
So, for those that need to transfer monies for school fees, medical bills and other legitimate transactions, how do they do that?
Our foreign exchange regulations provide how people can carry out their legitimate businesses, including payments of school fees, mortgages and other bills. All you need do is to go to your bank, fill the Form A and support it with the relevant invoices and the dollar will be wired to wherever you want it wired for your legitimate transactions. Don’t forget, before now, we always had BTAs and PTAs and what we did was to complement it with the activities of the BDCs. We made it more flexible, so we have BDC’s carrying out retail transactions for those who are travelling and want to pay medical bills. What we are saying is that these transactions must be done within the ambit of the law. The problem we have is not people who want to carry out legitimate transactions, either for payment of school fees and others, but we have certain people who are involved in currency substitution. There are certain people who got their wealth illegally and are thinking of the best ways to launder these funds. That is the main issue.
But there are some people who also consider the dollar as a better store of value?
Every country has its own legal tender. In Nigeria, our legal tender is the naira. In the US, the legal tender is dollar, the UK has the pound sterling. So, the citizens of that country are obligated to store their value in the legal tender of those countries. Let me put it this way, can you imagine if you choose to store your money in dollars and 170 million other people also choose to store their money in dollars, do you know what would happen to our legal tender? Do you know what would happen to the reserves of the country? So, that is why it is not advisable for anybody to contemplate that the best way they want to store their money is in a currency that is not the legal tender of that country.
But there was protest from the People’s Democratic Party which also released a statement. The statement reads:
“The Peoples Democratic Party (PDP) wishes to bring to the notice of President Muhammadu Buhari that the apparent absence of an economic team in the third month of his administration is leading the country into economic quagmire and doldrums.
“In the past, we had given examples of the devastating effect of lack of an economic team and a clear-cut fiscal policy by this administration as evidenced in the lull and painful decline in the stock market, spiral rate of inflation, the disastrous outing of the government team in bilateral talks during the recent visit to the United States of America and the shambolic state of our economy at present.
“This confusion has been extended to operations and regulations of the foreign exchange transactions in Nigeria wherein the government is making it impossible for honest Nigerians to engage in free trade and regulate their personal activities as guaranteed by the constitution, and this is clearly an agenda to illegally impose a communist economic regime on Nigerians.
“The most disturbing aspect of this communist economic agenda is the illegal and unlawful attempt to repeal the provisions of the Foreign Exchange Monitoring And Miscellaneous Provisions Act, otherwise known as Decree No 17 of 1995 and replace it with unilateral imposition of new regulations.
“This Act remains the subsisting law regulating the operations of domiciliary accounts in Nigeria and by its provisions therefore, Nigerians are empowered to freely open and operate domiciliary accounts.
“As such, any enactment and or regulation inconsistent with the provisions of this Act are deemed void. Thus, the recent foreign exchange transaction restrictions by this government are illegal, unlawful and void. Besides the provisions of the law, the PDP declares this administration’s archaic communist economic agenda as unworkable and unsustainable.”
In the last few months, the naira began to lose more value against international currencies.
The naira started a free fall when elections approached, exchanging for almost N220 to the dollar. By June, the dollar exchanged for N224 in the black market, and at the end of the July almost got to N250.
Now, the currency may regain a chunk of its value following the new stance of the banks and many say it might just exchange for a little below N200, and later hover nearer N170.